Strategy

Strategy

Calima’s business strategy is classically counter-cyclical, designed to take advantage of momentum returning to the oil and gas sector after the savage downturn in global oil and gas prices that started in 2014.

In response to the sudden decrease in price the oil industry reduced its capital expenditure by over 60% through 2015 and 2016. Expenditure on exploration was disproportionately cut because of its discretionary nature and lack of short-term impact on balance sheets. As a consequence the oil industry’s rate of discovery dropped to just over 6 billion barrels of oil equivalent in 2016, a level not seen since the 1940s. This meant the industry only replaced 12% of what the world consumed in 2016. To put this in perspective, offshore oil discoveries in 2016 were around 2.3 billion barrels of oil but that was 90% less than what was discovered offshore in 2010.

The dramatic reduction in reserves replacement does not have an immediate impact upon global oil production but with fewer new oil and gas field developments in the pipeline it does begin to have an impact in the medium term. The industry reacts, as it has in all previous cycles, by reducing its cost base so that most developments become profitable at the new prevailing lower prices. Some analysts are reporting deepwater breakeven prices reduced from approximately $80/barrel in 2014 to approximately $50/barrel in 2017. It has been claimed that deepwater developments in the Gulf of Mexico are now cost competitive with mainstream US unconventional plays.

As the industry and the capital markets adjust to a new price outlook, Calima believes focus will shift from reductions in capital expenditure to repairing reserve inventories and seeking growth opportunities. Some analysts predict a modest increase in capital investment for 2017, which may be an indication of the beginning of a new cycle.

Calima proposes to take advantage of the currently dislocated market to acquire projects where investment in geoscience can add disproportionate value in the short to medium term. In addition to the Montney Project and the other assets held by Calima, the Company will seek projects that could be the cornerstone of new oil and gas companies or should appeal to larger companies seeking opportunities for material growth.

The strategy is opportunistic and is not necessarily full-cycle in that the Board will focus on projects where there is a realistic chance of realising value for shareholders in the short to medium term.

The incoming management team have the necessary geoscience and commercial skills to identify suitable growth projects for Calima.

The first opportunity being pursued by the Company is to develop a position in the Montney play in Western Canada.

Azonto Petroleum Ltd (to be renamed Calima Energy Limited) (Company) Prospectus and Supplementary Prospectus for an offer of 50,000,000 Shares at an issue price of $0.045 each to raise $2,250,000 (before costs) (Public Offer). Oversubscriptions of up to a further 50,000,000 Shares at an issue price of $0.045 each to raise up to a further $2,250,000 (before costs) may be accepted under the Public Offer.
The Prospectus and Supplementary Prospectus also contain:

an offer of 28,508,751 Shares and 20,029,226 Performance Shares to Havoc (or its nominee/s) in consideration for the acquisition of all of the issued capital of Calima (Vendor Offer);

an offer of 20,000,750 Shares to the Calima Noteholders (or their nominee/s) in satisfaction of the Calima Note Debt (Convertible Note Share Offer);

an offer of 20,000,000 Management Options to Incoming Management (or their nominee/s) (Management Option Offer); and

an offer of 3,333,333 Shares to Euroz (or its nominee/s) as part of the fees payable for acting as corporate adviser to the Company in relation to the Proposed Transaction generally (Adviser Offer),

(together with the Public Offer, the Offers).
The Prospectus is dated 30 June 2017 and the Supplementary Prospectus is dated 28 July 2017. The expiry date of the Prospectus is the date that is 13 months from the date of the Prospectus.
Unless otherwise stated, all references to securities of the Company as set out herein are on a post-Consolidation basis (refer to the Company’s Notice of General Meeting dated 15 June 2017 for further details).

IMPORTANT INFORMATION

The Prospectus and Supplementary Prospectus are important documents that should be read together in their entirety. If you do not understand either of them you should consult your professional adviser without delay.
Lodgement of Prospectus and Supplementary Prospectus with the ASIC
The paper form of the electronic Prospectus and Supplementary Prospectus accessible through this website have been lodged with the Australian Securities and Investments Commission (ASIC).
An application for Shares under the Public Offer can be made by either:

printing and completing the Public Offer Application Form attached to or accompanied by the electronic Prospectus and Supplementary Prospectus; or

completing the Public Offer Application Form attached to or accompanied by a paper form of the Prospectus and Supplementary Prospectus,

and then lodging the form and the application monies in accordance with the details set out in the Prospectus and Supplementary Prospectus and the Public Offer Application Form.

WARNING

For legal reasons, the information and electronic Prospectus and Supplementary Prospectus provided by this website are available to persons accessing this website from within AUSTRALIA ONLY. If you are accessing this website from anywhere outside Australia, please DO NOT download the electronic Prospectus or Supplementary Prospectus accessible through this website.
This Prospectus and Supplementary Prospectus do not constitute an offer of securities in any jurisdiction where, or to any person to whom, it would not be lawful to issue the Prospectus or Supplementary Prospectus or make the Offers. It is the responsibility of any applicant outside Australia to ensure compliance with all laws of any country relevant to their applications, and any such applicant should consult their professional advisers as to whether any government or other consents are required, or whether any formalities need to be observed to enable them to apply for and be issued any securities.
No action has been taken to register or qualify the securities or the Offers or otherwise to permit a public offering of the securities in any jurisdiction outside Australia.